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A Financial War Can’t Stop Iran. Here’s What Can.

(Bloomberg Opinion) -- Having pulled out of the nuclear deal with Iran, the Trump administration is looking for additional ways of restraining its adversary’s regional ambitions. In a visit this week to the United Arab Emirates and then at the NATO meeting in Brussels, Secretary of State Mike Pompeo reportedly focused on working with allies to turn up the heat on Tehran.

The heart of the strategy involves an all-out financial war against Iran. This seeks to reduce Iran’s oil revenues to zero and exclude Iranian individuals, companies and other entities from international commerce.

But it’s unlikely that even an effective financial war would be enough to curb Iran’s efforts to expand regional influence and destabilize Arab neighbors, let alone abandon its nuclear ambitions. To do that, the U.S. would also have to mobilize support from its Middle Eastern allies for a carefully constructed program of political, financial and military pressure that produces a spiraling series of setbacks for Iran.

And that would require more patience and calculation, plus a willingness to put U.S. troops in harm’s way, than the administration of President Donald Trump has shown so far.

The first step is to abandon the fantasy that economic pressure alone can bring down the deeply entrenched, 40-year-old Iranian system. There’s no history of externally driven regime change anywhere resulting from such pressures, especially when there’s no plausible alternative leadership. The more likely effect would be to strengthen hard-liners and produce a more antagonistic, if less flush, Iranian regime.

Pompeo hasn’t fallen victim to that kind of magical thinking, suggesting instead that financial pressure could persuade Iran to engage in renewed talks leading to a new agreement that both restricts its nuclear activities and limits long-range missile development and support for violent militias in neighboring Arab countries.

But that won’t happen either without a plan to reverse some of Iran’s recent regional military and political regional expansion and roll back its expeditionary forces and violent proxy groups from neighboring countries. Without subjecting Iran to a series of strategic defeats, the regime can just hunker down and wait economic sanctions out.

Iran’s presence in Syria must be significantly reduced, and, eventually, its proxy militias, above all Hezbollah, removed from the country. That will take time, effort and, probably, military action. And it’s immediately essential that any potential for an Iranian-controlled “land bridge” cutting across Iraq and Syria to Lebanon and the Mediterranean coast remains foreclosed by keeping parts of Syria under the control of the U.S. and its allies.

Iran’s support for the Houthi rebels in Yemen, and especially their rocket attacks on Saudi cities, also need to be urgently curtailed through increased maritime interdiction of smuggled weapons, and the war there ended by a political agreement among Yemeni factions that relieves the country from serving as a playground for Iranian meddling.

This rollback agenda may involve some limited U.S. military actions, alone or in coordination with regional allies such as Gulf Arab countries or Israel. But any effective U.S. policy to curb the power of Iran must involve a willingness to use bombing and missile attacks and special forces operations, to counteract Iran’s own recent military gains and limit where and how Iran’s forces and proxies can operate with impunity.

Washington should also work with Gulf Arab countries and others to promote a more independent, nationalistic government in Iraq and begin to exploit emerging differences between Iran and Russia over Syria. It’s possible to enlist Russia in the campaign to end Iran’s undue influence in Syria because Iran’s overweening ambitions threaten all that Moscow and Damascus have gained in the Syrian war.

This combination of financial, political and limited military pressure would, over time, impose a new calculus in Tehran, no matter how angry and aggressive Iranians feel.

At that point, negotiations could again become plausible.

As in the past, Europe can serve as the go-between between a forceful U.S. and an angry Iran. In 2003, at a time of high tensions between Washington and Tehran, European foreign ministers nonetheless negotiated what later became the framework for the 2015 nuclear deal.

If Iran is forced to choose between economic ruin and an uphill struggle over its regional role, versus coming to reasonable terms with the U.S. and its Arab and Israeli allies, the rational voices within the Iranian regime that have prevailed at times of crisis since the Islamic revolution are likely to bring Iran back to the table.

Iran will continue be ruled by the current regime and will play a larger regional role than the U.S. or its allies would want. But there’s a middle ground between the defeated and regime-changed Iran wished for by its foes, and Iran’s own fantasies of becoming the dominant regional superpower with nuclear weapons and a secure military corridor all the way to the Mediterranean Sea.

For a compromise to become possible, the pressure must continue to steadily build. The Trump administration should take care not to foreclose prospects for a new understanding by embarking on a quixotic quest for regime change.

The key at this stage is for American intentions to be reasonable, consistent and clear to everyone. A standoff for its own sake would be pointless at best, and counterproductive at worst.